How to make a good business even better
Successful business owners know that ongoing improvements play a big role in business growth. Your competitors can be a key source for inspiration.
Managers of large corporations regularly and systematically look at the performance of other companies to determine how they compare and where they can improve. Regardless of the size of your business, it can still benefit if you follow the lead of larger corporations. Whether the review you conduct is formal or informal, complex or simple, a benchmarking exercise can help reduce costs, improve performance, and infuse your business with new ideas.
While you're conducting your review, CIBC business advisors and their team of specialists can direct you to relevant data sources, and provide feedback to help you focus on the areas that are most important to your business.
Following are some suggestions to help you with your evaluation process.
- Understanding your challenges
As with any undertaking, the first step is to understand your challenges. What area of the business do you want to evaluate? What key processes affect performance? Where do you suspect there might be room for improvement? Some of the most common areas for examination include cost control, inventory management, customer service, IT, and human resources.
- Identifying your measures
Break down the general area for study by selecting one specific process at a time (such as order taking) rather than looking at an entire system (such as fulfilment), which comprises many processes. This will produce the most meaningful results and a greater likelihood of making real and lasting change in a reasonable time frame.
- Collecting your information
What data will you need to gather to establish your baseline position in the chosen area?
Financial figures aren't the only ones worth examining. For example, if you are studying product delivery, you could look at shipment times, percentage of late shipments, and customer feedback, in addition to actual shipping costs.
If the area you want to study is intangible, try to determine measurable items that are related. To explore employee satisfaction, for instance, you might monitor employee turnover and absenteeism.
- Looking externally
Having established a baseline for your firm's past performance, it's time to look outward. How will you select the other companies?
In addition to comparing your business to your direct competitors, you might also find useful data from firms in other industries that operate in a geographic area similar to yours or that serve a similar demographic market.
There are several ways to collect the information you need. Quantitative data on standard business numbers such as revenue, cost of goods sold, and debt to equity ratio can be acquired from government and industry resources.
For more qualitative data, you might consider interviewing a company rep or using a survey. Many companies are willing to provide information.
- Analyzing the data
The significant part of the analysis is uncovering major gaps between internal and external data. You can use these differences as a guideline to discover where there is room for improvement. Keep in mind, however, that every company is different, so some of the gaps may simply reflect a particular focus or priority of your company.
For example, your production and staffing costs might be twice those of your competitor; but if your unique selling proposition is to provide superior quality, those costs may well be warranted.
- Finding the solution
Your findings will provide the foundation for improvements. Sometimes, they will hold the actual solution (as in changing suppliers to cut costs), while, in other cases, they will signal an area where further research or some creative brainstorming is required.
Always consider the big picture. For example, a faster ordering process may reduce costs, but it may also reduce your ability to develop relationships with your customers.
- Implementing new processes
Here are some key principles to follow at the implementation stage:
- Set clear and realistic targets
- Consider other areas of your business that might be affected by the changes
- Establish a time frame for achieving goals
- Put the plan in writing
- Communicate the plan to your staff
At the end of the time frame, review your benchmark data. You may well find that even small improvements to the way you run your business can bring large rewards in efficiency and profitability.
Discuss your business plans and goals with your CIBC business advisor, who can help you meet your company's financial goals.